Black Knight: Record $4.4 Trillion in Mortgage Originations in 2021; Year Sees $1.2 Trillion in Cash-Out Refis as Homeowners Tap $275 Billion in Equity, a 16-Year High

Rhea-AI Summary

Black Knight, Inc. (NYSE:BKI) announced a record-breaking $4.4 trillion in mortgage originations for 2021, contradicting initial predictions of a decline. The report highlights a significant shift towards equity-driven refinancing, with homeowners cashing out $1.2 trillion, marking a 20% growth in this area. Despite this, retention of cash-out refinance borrowers remains a challenge, with rates lower than traditional refinances. Rising home values have led to improved loan-to-value ratios, aiding in better risk profiles for these loans.

Positive

• Total mortgage originations reached a record $4.4 trillion in 2021.
• $1.2 trillion in cash-out refinances indicates a 20% growth.
• Homeowners withdrew $275 billion in equity, the highest in 16 years.
• Post-cash-out loan-to-value ratios improved, lowering overall risk.

Negative

• Cash-out refinance borrower retention remains challenging, 8 percentage points lower than traditional refinances.
• Retention rates for cash-out loans are lower, with borrowers switching lenders receiving only 5 basis points better rates.

JACKSONVILLE, Fla., March 7, 2022 /PRNewswire/ -- Today, the Data & Analytics division of Black Knight, Inc. (NYSE:BKI) released its latest Mortgage Monitor Report, based upon the company's industry-leading mortgage, real estate and public records datasets. This month's report looks into 2021's record-breaking $4.4 trillion in mortgage originations and the distinct shift to an equity-driven refinance market. According to Black Knight Data & Analytics President Ben Graboske, though American homeowners are tapping their homes' equity via cash-out refinances at the highest level since 2005, they are doing so judiciously, at roughly half the rate seen back then.

"Entering 2021, consensus opinion was that originations would likely come in 20-25% lower than 2020's record-breaking levels," said Graboske. "Our own forecast suggested a slighter decline, on the order of -7%. In the end, total originations came in at $4.4 trillion, actually outpacing the prior record. At $1.7 trillion for the year, purchase lending also hit the highest point ever recorded, while the $2.7 trillion in refinance lending was a bit below 2020 levels. What stands out is the 20% growth in cash-outs over 2021, which accounted for $1.2 trillion in originations last year and $275 billion in equity withdrawn. In Q4 alone, homeowners tapped $80 billion – the most in 15 years – while marking the fifth consecutive quarter of more than 1 million borrowers pulling cash out. And yet, despite that sizable withdrawal, surging home values meant overall tappable equity still grew by nearly $450 billion in the quarter.

"Likewise, rising home values are resulting in much lower post-cash-out LTVs than we've seen in recent years – and more than 10 points lower than during the previous peak – while high average credit scores are also helping to lower the overall risk profile of these loans. We've been discussing this shift to an equity-centric market for some time, and our Optimal Blue rate lock data showed that cash-out activity continued to increase in January of this year as well. Now for the bad news: retention of cash-out refinance borrowers has been notoriously difficult. Even in a quarter that saw overall retention rates hit an eight-year high, cash-out retention was still 8 percentage points lower than for rate/term refis. Servicers continue to struggle with this segment, despite strong improvement."

Drilling in deeper to the latest retention data, the report finds that borrowers who changed lenders received interest rates just 5 basis points lower, on average, than those who were retained by their current lender/servicer – the smallest delta in 2.5 years. This suggests pricing – while certainly important – is not the only factor necessary to retain a current customer, particularly if they are looking to take equity out of their home. Lenders and servicers that create a positive customer experience see greater loyalty and retention.  Indeed, servicers using Black Knight's cloud-native Servicing Digital customer engagement platform saw nearly 20% better retention for loans that were on the platform as compared to those that were not.

Retention metrics also highlight the need for data-driven marketing strategies and portfolio analysis, especially with rate/term refinance incentive cut by 65% year-to-date and lenders competing for a shrinking pool of high-quality candidates. In a market dominated by equity-centric lending, it becomes paramount for lenders/servicers to be able to accurately identify borrowers who meet certain defined criteria and are most likely to tap into the record levels of equity, and then create targeted marketing campaigns personalized for those specific borrowers.

 About the Mortgage Monitor
The Data & Analytics division of Black Knight manages the nation's leading repository of loan-level residential mortgage data and performance information covering the majority of the overall market, including tens of millions of loans across the spectrum of credit products and more than 160 million historical records. The combined insight of the Black Knight HPI and Collateral Analytics' home price and real estate data provides one of the most complete, accurate and timely measures of home prices available, covering 95% of U.S. residential properties down to the ZIP-code level. In addition, the company maintains one of the most robust public property records databases available, covering 99.9% of the U.S. population and households from more than 3,100 counties.

Black Knight's research experts carefully analyze this data to produce a summary supplemented by dozens of charts and graphs that reflect trend and point-in-time observations for the monthly Mortgage Monitor Report. To review the full report, visit: https://www.blackknightinc.com/data-reports/

About Black Knight
Black Knight, Inc. (NYSE:BKI) is an award-winning software, data and analytics company that drives innovation in the mortgage lending and servicing and real estate industries, as well as the capital and secondary markets. Businesses leverage our robust, integrated solutions across the entire homeownership life cycle to help retain existing customers, gain new customers, mitigate risk and operate more effectively.

Our clients rely on our proven, comprehensive, scalable products and our unwavering commitment to delivering superior client support to achieve their strategic goals and better serving their customers. For more information on Black Knight, please visit www.blackknightinc.com/.

For more information:
Michelle Kersch	Mitch Cohen
904.854.5043	704.890.8158
michelle.kersch@bkfs.com	mitch.cohen@bkfs.com

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SOURCE Black Knight, Inc.

FAQ

What record did Black Knight, Inc. (BKI) achieve in 2021?

Black Knight reported a record $4.4 trillion in mortgage originations for 2021.

How much equity did homeowners withdraw in 2021 according to Black Knight's report?

Homeowners withdrew $275 billion in equity through cash-out refinances.

What are the challenges faced by cash-out refinance borrowers in retention?

Retention rates for cash-out refinance borrowers are 8 percentage points lower than traditional refinances.

What percentage growth was observed in cash-out refinances in 2021?

Cash-out refinances saw a 20% growth in 2021.